pacific university section 403(b) plan · 2014. 3. 17. · pacific university section 403(b) plan:...

PACIFIC UNIVERSITY SECTION 403(b) PLAN

Financial Statements and Supplemental Schedule

December 31, 2010 and 2009

(With Independent Auditors’ Report Thereon)


Table of Contents

Page

Independent Auditors’ Report 1

Financial Statements:

Statements of Net Assets Available for Benefits – December 31, 2010 and 2009 2

Statements of Changes in Net Assets Available for Benefits – Years ended December 31, 2010 and 2009 3

Notes to Financial Statements 4

Supplemental Schedule

Schedule I: Schedule H – Line 4i – Schedule of Assets (Held at End of Year) December 31, 2010 17

KPMG LLP Suite 3800 1300 South West Fifth Avenue Portland, OR 97201

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity.

Independent Auditors’ Report

The Retirement Plan Committee Pacific University Section 403(b) Plan:

We were engaged to audit the financial statements and supplemental schedule of Pacific University Section 403(b) Plan (the Plan) as of December 31, 2010 and 2009, the related statements of changes in net assets available for benefits for the years then ended, and the supplemental schedule of Schedule H, line 4i-schedule of assets (held at end of year) as of December 31, 2010. These financial statements and supplemental schedule are the responsibility of the Plan’s management.

The Plan has not maintained sufficient accounting records and supporting documents relating to certain annuity and custodial accounts issued to current and former employees prior to January 1, 2009. Further, management has instructed us not to perform, and we did not perform, any auditing procedures with respect to investments or the investment activity included in the financial statements. Accordingly, we were unable to apply auditing procedures sufficiently to determine the extent to which the financial statements may have been affected by these conditions.

As discussed in note 2 to the financial statements, the Plan has excluded from investments in the accompanying statements of net assets available for benefits certain annuity and custodial accounts issued to current and former employees prior to January 1, 2009, as permitted by the Department of Labor’s Field Assistance Bulletin No. 2009-02, Annual Reporting Requirements for 403(b) Plans. The investment income and distributions related to such accounts have also been excluded in the accompanying statements of changes in net assets available for benefits. The amount of these excluded annuity and custodial accounts and the related income and distributions are not determinable. Accounting principles generally accepted in the United States of America require that these accounts and the related income and distributions be included in the accompanying financial statements.

Because of the matters discussed in the preceding paragraphs, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the Plan’s net assets available for benefits as of December 31, 2010 and 2009, and the changes in its net assets available for benefits for the years then ended.

We were engaged to audit the basic financial statements. The supplemental schedule, Schedule H, line 4i, schedule of assets (held at end of year) at December 31, 2010, is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. Because of the significance of the matters described in the second and third paragraphs of this report, we express no opinion on the supplemental schedule.

August 18, 2011

PACIFIC UNIVERSITYSECTION 403(b) PLAN

Statements of Net Assets Available for Benefits


2010 2009

Investments, at fair value:Shares in registered investment company funds without

publicly quoted market prices $ 28,755,565 24,503,230 Shares in registered investment company funds with

publicly quoted market prices 10,545,415 7,287,067 Pooled separate accounts 9,859,058 8,457,265 Insurance contracts 21,989,312 21,265,419

Total investments at fair value 71,149,350 61,512,981

Contributions receivable:Employer 9,137 246,430 Employee 4,437 156,742

Total contributions receivable 13,574 403,172

Excess contributions payable (60,000) —

Net assets available for benefits $ 71,102,924 61,916,153

See accompanying notes to financial statements.

2

PACIFIC UNIVERSITYSECTION 403(b) PLAN

Statements of Changes in Net Assets Available for Benefits

Years ended December 31, 2010 and 2009

2010 2009

Contributions:Employer contributions $ 3,027,164 2,705,705 Employee contributions 2,435,829 2,339,990 Rollover contributions 306,433 157,808

Total contributions 5,769,426 5,203,503

Investment income:Dividends and interest income 1,075,919 920,856 Net appreciation in fair value of investments 5,446,074 7,297,853

Total investment income 6,521,993 8,218,709

Deductions:Benefit payments (3,091,068) (3,708,885) Administrative expenses (13,580) (10,699)

Total deductions (3,104,648) (3,719,584)

Net increase 9,186,771 9,702,628

Net assets available for benefits, beginning of year 61,916,153 52,213,525

Net assets available for benefits, end of year $ 71,102,924 61,916,153

See accompanying notes to financial statements.

3


Notes to Financial Statements


4 (Continued)

(1) Description of the Plan

The following description of the Pacific University Section 403(b) Plan (the Plan) provides only general information. Participants should refer to the plan document for a more complete description of the Plan’s provisions.

(a) General

The Plan is a 403(b) defined contribution plan covering all employees of Pacific University (Pacific) except for students performing services that are enrolled at Pacific and regularly attending classes and temporary faculty and staff, as defined in the plan document. The Plan has an effective date of January 1, 1947 and was amended and restated effective January 1, 2009. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. Pacific is the Plan’s sponsor and serves as the plan administrator. The custodians of the Plan are Teachers Insurance and Annuity Association – College Retirement Equities Fund (TIAA-CREF) and Variable Annuity Life Insurance Company (VALIC).

(b) Eligibility

Employees are eligible to participate in the Plan on the first day of employment and provided they are not a student or employee that works less than 20 hours a week and is not expected to work 1,000 hours during a 12-month period. Eligible employees can make employee contributions to the Plan upon employment. Eligible employees, except adjunct faculty, temporary and on-call employees are eligible to receive employer contributions after the employee has completed one year of service with Pacific and are 21 years of age. An eligible employee will receive a year of service if the individual worked at least half time for an educational institution during the entire 12 month period preceding employment with Pacific.

(c) Contributions

Eligible employees can defer up to 100% of their eligible compensation into the Plan, up to the maximum allowed by the Internal Revenue Code (IRC). Participants are allowed to make additional catch-up contributions to the Plan if they are 50 years of age or older as of the end of the plan year. Pacific will make an employer contribution equal to 9% of the employee’s eligible compensation. Contributions are made to the Plan each pay period. Additionally, participants are permitted to make rollover contributions to the Plan from an individual retirement account or annuity.

(d) Participant Accounts

Each participant’s account is credited with employee contributions, Pacific’s contributions, plan earnings and an allocation of administrative expenses. Allocations are based on compensation or account balances, as defined by the plan document. Participants may direct their contributions into a variety of investment options offered by TIAA-CREF and VALIC. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. The participant accounts are valued daily.




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(e) Vesting

Participants are immediately fully vested in their employee and employer contributions and earnings thereon.

(f) Plan Loans

Loans are available to participants through TIAA, subject to certain limitations. Plan loans are issued directly from the funds owned by TIAA and loan proceeds are not removed from a participant’s account balance. However, a portion of a participant’s TIAA Traditional Annuity account balance is reserved, or held in collateral, to cover the outstanding loan amount for the period of time the loan is outstanding. For active loans, investments equal to 110% of the outstanding loan amount are reflected in the statements of net assets available for benefits and serve as collateral for the loan. Investments underlying defaulted loan balances are reflected in the statements of net assets available for benefits until a distribution event occurs.

At December 31, 2010 and 2009, participants had outstanding plan loan balances due to TIAA of $345,088 and $214,034, respectively.

Loans are also available to participants through VALIC, subject to certain limitations. Plan loans are issued directly from the funds owned by VALIC and loan proceeds are reclassified from a participant’s investment account balance to loan collateral or escrow fund account for tracking purposes. Issuance of these plan loans has no impact on the statements of net assets available for benefits.

At December 31, 2010 and 2009, participants had outstanding plan loan balances due to VALIC of $354,145 and $249,362, respectively.

(g) Payment of Benefits

Participants may receive all or a portion of their account balance upon termination of employment or the participant’s required beginning date. Benefits may be paid in the form of a single lump sum or may be paid under optional forms, including the following: (a) payments over a fixed time period; (b) life annuity with or without a term certain; or (c) joint and survivor annuity. If a participant dies or becomes disabled before distributions to the participant begin, the distribution of benefits may be elected at any time commencing no later than the month in which the participant would have attained age 70½.

(h) Hardship Withdrawals

Under certain conditions, participants, while still employed by Pacific, are permitted to withdraw, in a single sum, the employee contribution portion of their account balance. These conditions include unreimbursed medical expenses, the purchase of the participant’s principal residence, the payment of postsecondary education tuition, the payment of burial or funeral costs of immediate family members, the payment of natural disaster clean-up on the participant’s principal residence, or to prevent eviction or foreclosure from the participant’s principal residence. A participant’s right to




6 (Continued)

make deferrals to the Plan will be suspended for six months after the receipt of a hardship withdrawal.

(2) Summary of Significant Accounting Policies

(a) Basis of Accounting

The accompanying financial statements of the Plan are prepared on the accrual basis of accounting.

Investment contracts held by a defined contribution plan are required to be reported at fair value. Certain TIAA Traditional Annuity contract types, including the Supplemental Retirement Annuities (SRA) and the Group Supplemental Retirement Annuities (GSRA), are considered fully benefit-responsive, and contract value approximates fair value as of December 31, 2010 and 2009. However, other types are not considered fully benefit-responsive due to certain limitations or restrictions. See note 3 for further discussion of the TIAA Traditional Annuity.

As discussed in note 1, the Plan was established in 1947 and historically was viewed as an amalgamation of individual annuity and custodial accounts and the Plan and its custodians were not required to maintain financial information at a plan level. As of December 31, 2008, the Plan’s custodians have begun to provide the plan administrator with annual certified statements summarizing the Plan’s activities and holdings. Because certain historical records were not maintained or were not available at a Plan level prior to that date, the Plan may have excluded from investments in the accompanying statements of net assets available for benefits certain annuity and custodial accounts, and related activity, issued to current and former employees prior to January 1, 2009. This accounting policy election is permitted by the Department of Labor’s Field Assistance Bulletin No. 2009-02, Annual Reporting Requirements for 403(b) Plans (FAB 2009-2); however, accounting principles generally accepted in the United States of America require that these accounts and the related income and distributions be included in the accompanying financial statements. The amount of such excluded annuity and custodial accounts and the related income and distributions that may exist are not determinable.

(b) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires the Plan’s management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

(c) Investment Valuation and Income Recognition

The Plan follows the fair value measurement and disclosure requirements of ASC 820, which defines fair value as the exchange price that would be received for the asset or paid to transfer a liability in principal or most advantageous market for the asset or liability. See note 6 for discussion of fair value measurements.

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation in fair value of




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investments includes the gains and losses on investments bought and sold during the year as well as the change in the unrealized appreciation or depreciation on those investments from one period to the next.

(d) Risks and Uncertainties

The Plan assets are invested in a variety of investments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits.

(e) Payment of Benefits

Benefits are recorded when paid.

(f) Administrative Expenses

Certain administrative expenses related to the Plan totaling approximately $38,000 and $5,000 were paid by Pacific for the years ended December 31, 2010 and 2009, respectively. Expenses not paid by the employer are charged to participant accounts.

(g) Subsequent Events

Pacific has evaluated subsequent events with respect to the Plan through August 18, 2011, the date the financial statements were available to be issued.

(3) TIAA Traditional Annuity

The TIAA Traditional Annuity is a guaranteed fixed annuity contract available as an investment option to plan participants. Each contract is fully and unconditionally guaranteed by TIAA. The Traditional Annuity is offered through a variety of contract types, including Retirement Annuities (RA), Group Retirement Annuities (GRA), SRA, GSRA, and Retirement Choice Plus (RCP). The type of contract through which a participant invests in the TIAA Traditional Annuity determines the applicability of certain account features, such as the guaranteed minimum interest rate, additional interest declarations, the degree of liquidity of the participant’s account, and the options for receiving income upon retirement.

When participants choose to allocate a portion of their retirement savings to the TIAA Traditional Annuity during the accumulation phase of the contract, their contributions purchase a specific amount of lifetime income based on the contractual rate schedule in effect at the time the premium is paid. The participant’s principal, plus a specified minimum rate of interest, is guaranteed by TIAA’s claims-paying ability. The TIAA Traditional Annuity also provides the potential for additional interest if declared by TIAA’s Board of Trustees. Additional interest, when declared, remains in effect for the declaration year, which begins each March 1 for accumulating annuities, and January 1 for lifetime payout annuities. Additional interest is not guaranteed for future years. Together, the guaranteed minimum and additional amounts make up the crediting interest rate. For accumulating RA and GRA contracts, the crediting interest rates were 3.35% and 3.65% as of December 31, 2010 and 2009, respectively. For accumulating SRA and GSRA contracts,




8 (Continued)

the crediting interest rate was 3.00% as of December 31, 2010 and 2009. For accumulating RCP contracts, the crediting interest rate was 2.60% and 3.00% as of December 31, 2010 and 2009, respectively.

The RA contract does not allow lump-sum cash withdrawals and transfers must be spread over 10 annual installments. With the GRA, lump-sum withdrawals are available within 120 days of termination of employment and are subject to a 2.50% surrender charge. All other withdrawals and transfers from RA and GRA contracts must be spread over 10 annual installments (5 annual installments for withdrawals after termination of employment). The SRA, GSRA, and RCP contracts provide for full participant-directed liquidity. When a participant’s accumulation in the TIAA Traditional Annuity is converted to a lifetime payout annuity, the present value of the stream of payments is equal to the accumulated balance, and the entire amount is recorded as a distribution in the statements of changes in net assets available for benefits.

(4) VALIC Fixed Account Annuity

The VALIC Fixed Accounts are credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses as allowed by the Plan. VALIC has determined that contract value approximates fair value. Contract value, as determined by VALIC, represents contributions made under the agreement, plus earnings, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.

There are no reserves against contract value for credit risk of the contract issuer or otherwise. The minimum guaranteed interest rate varies by participant and depends on the date the participant established their account. For the year ended December 31, 2010, the minimum rate ranged from 2.75% to 3.50%. For the year ended December 31, 2009, the minimum rate ranged from 3.75% to 4.75%. The average yield to maturity at December 31, 2010 and 2009 was 3.62% and 3.88%, respectively.

(5) Investments

Investments representing more than 5% of net assets at December 31, 2010 and 2009 were as follows:

2010 2009

CREF Stock Account $ 11,862,879 10,242,381 TIAA Traditional Annuity 19,562,414 19,307,161




9 (Continued)

Investments appreciated in fair value during the year ended December 31, 2010 and 2009 as follows:

2010 2009

Shares in registered investment company funds withpublicly quoted market prices $ 1,042,681 1,438,968

Shares in registered investment company funds withoutpublicly quoted market prices 3,161,908 4,924,110

Pooled separate accounts 1,241,485 934,775

$ 5,446,074 7,297,853

(6) Fair Value Measurements

ASC 820 establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.

Level 2 – Inputs to the valuation methodology include:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in inactive markets;

Inputs other than quoted prices that are observable for the asset or liability;

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.




10 (Continued)

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2010 and 2009.

Shares in registered investment company funds with publicly quoted market prices.

These shares consist of TIAA-CREF registered investment company funds. The fair values are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs).

Shares in registered investment company funds without publicly quoted market prices.

These shares consist of CREF accounts (registered investment company funds). The fair values are determined based on each account’s daily NAV, which is considered by plan management to be the best approximation of fair value. CREF accounts are not exchange traded and are classified within Level 2 of the fair value hierarchy. Data for NAVs are available daily to plan administrators and client investors on TIAA-CREF’s website, and provides sufficient corroborative evidence to ascertain the relationship between each fund’s NAV and the values of individual underlying holdings. Underlying holdings are primarily valued using market quotations or prices obtained from independent pricing sources. There are no unfunded commitments from participants in the Plan who invest in these accounts.

Pooled separate accounts

Pooled separate accounts consist of TIAA Real Estate Account and VALIC variable accounts.

The fair value of the Plan’s interest in the TIAA Real Estate Account (a pooled separate account) is based on the fund’s daily NAV, which is considered by plan management to be the best approximation of fair value. This investment is classified within Level 3 of the fair value hierarchy. The unit value of the fund is calculated daily and available to plan administrators and client investors on TIAA-CREF’s website. Underlying holdings are primarily valued using independent appraisals or independent pricing sources. There are no unfunded commitments from participants in the Plan who invest in this account.

The fair values of accumulation units held by the Plan in VALIC variable accounts (pooled separate accounts) are managed by individual investment adviser for each fund. VALIC variable accounts are not exchange traded and are classified within Level 2 of the fair value hierarchy. Data for NAVs are changed daily to plan administrators and client investors on VALIC’s website, and provides sufficient corroborative evidence to ascertain the relationship between each fund’s NAV and the values of individual underlying holdings. Underlying holdings are primarily mutual funds. There are no unfunded commitments from participants in the Plan who invest in these accounts.




11 (Continued)

Insurance contracts

Insurance contracts consist of TIAA Traditional Annuity contracts and VALIC Fixed Accounts.

Investments in TIAA Traditional Annuity contracts are reported at contract value, which approximates fair value. As these investments are contract-based, observable prices for identical or similar investments do not exist, and accordingly, these investments are valued using unobservable inputs (Level 3). The contract value equals the accumulated cash contributions and interest credited to the contract, less any withdrawals. Liquidity restrictions apply to certain types of contracts that could impact the value realized upon exiting the contract. See also note 3 for discussion of the TIAA Traditional Annuity.

Investments in VALIC Fixed Accounts are reported at contract value, which approximates fair value. As these investments are contract-based, observable prices for identical or similar investments do not exist, and accordingly, these investments are valued using unobservable inputs (Level 3). Also see note 4 for discussion of the VALIC Fixed Accounts.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.




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The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2010:

Investments at fair valueLevel 1 Level 2 Level 3 Total

Shares in registered investmentcompany funds with publiclyquoted market prices:

Index $ 465,880 — — 465,880 Mixed asset 5,484,487 — — 5,484,487 Growth 4,525,542 — — 4,525,542 Other 69,506 — — 69,506

Shares in registered investmentcompany funds withoutpublicly quoted market prices:

Mixed asset — 3,135,893 — 3,135,893 Growth — 19,496,267 — 19,496,267 Fixed income — 6,123,405 — 6,123,405

Pooled separate accounts:Index — 1,679,399 — 1,679,399 Mixed asset — 1,216,019 — 1,216,019 Growth — 4,331,617 — 4,331,617 Fixed income — 779,824 — 779,824 Other — 95,356 1,756,843 1,852,199

Insurance contracts — — 21,989,312 21,989,312

$ 10,545,415 36,857,780 23,746,155 71,149,350




13 (Continued)

The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2009:

Investments at fair valueLevel 1 Level 2 Level 3 Total

Shares in registered investmentcompany funds with publiclyquoted market prices:

Index $ 130,259 — — 130,259 Mixed asset 3,275,435 — — 3,275,435 Growth 3,835,022 — — 3,835,022 Other 46,351 — — 46,351

Shares in registered investmentcompany funds withoutpublicly quoted market prices:

Mixed asset — 2,438,927 — 2,438,927 Growth — 17,061,712 — 17,061,712 Fixed income — 5,002,591 — 5,002,591

Pooled separate accounts:Index — 1,337,945 — 1,337,945 Mixed asset — 1,080,868 — 1,080,868 Growth — 3,860,294 — 3,860,294 Fixed income — 821,002 — 821,002 Other — 103,386 1,253,770 1,357,156

Insurance contracts — — 21,265,419 21,265,419

$ 7,287,067 31,706,725 22,519,189 61,512,981




14 (Continued)

Level 3 Gains and Losses

The following table sets forth a summary of changes in the fair value of the Plan’s Level 3 investments for the year ended December 31, 2010:

Level 3 assets year endedDecember 31, 2010

Pooledseparate Insuranceaccounts contracts

Balance at beginning of year $ 1,253,770 21,265,419 Realized losses (19,404) — Unrealized gains relating to instruments still held at the

reporting date 216,551 — Purchases, sales, issuances, and settlements, net 305,926 723,893

Balance at end of year $ 1,756,843 21,989,312

The following table sets forth a summary of changes in the fair value of the Plan’s Level 3 investments for the year ended December 31, 2009:

Level 3 assets year endedDecember 31, 2009

Pooledseparate Insuranceaccounts contracts

Balance at beginning of year $ 2,024,609 19,849,177 Realized losses (124,079) — Unrealized losses relating to instruments still held at the

reporting date (412,443) — Purchases, sales, issuances, and settlements, net (234,317) 1,416,242

Balance at end of year $ 1,253,770 21,265,419

The following table provides information regarding redemption of investments where the NAV has been used as a practical expedient at December 31, 2010:

Redemption RedemptionFair value frequency period

Shares in registered investmentcompany funds without publiclyquoted market prices $ 28,755,565 Daily 1 day

Pooled separate accounts 9,859,058 Quarterly 1 day




15 (Continued)

The following table provides information regarding redemption of investments where the NAV has been used as a practical expedient at December 31, 2009:

Redemption RedemptionFair value frequency period

Shares in registered investment companyfunds without publicly quoted marketprices $ 24,503,230 Daily 1 day

Pooled separate accounts 8,457,265 Quarterly 1 day

The investment in CREF registered investment company funds without publicly quoted market prices had a fair value of $28,755,565 and $24,503,230 at December 31, 2010 and 2009, respectively, have a lock-up period of 90 days if a purchase, sale and repurchase within that account is made within a 60-day period, other than for the CREF Money Market Account.

Investments of pooled separate accounts in TIAA Real Estate account had a fair value of $1,756,843 and $1,253,770 at December 31, 2010 and 2009, respectively. Other pooled separate accounts in VALIC variable accounts had a fair value of $8,102,215 and $7,203,495 at December 31, 2010 and 2009, respectively.

(7) Income Tax Status

The Plan is intended to comply with the applicable requirements of Section 403(b) of the Internal Revenue Code of 1986, as amended (IRC). A tax determination letter program is not yet available for IRC Section 403(b) plans through the Internal Revenue Service. The plan administrator believes that the Plan is currently designed and being operated in compliance with applicable requirements of the IRC and as such is exempt from federal income taxes.

Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2010, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examinations for years prior to 2009.

(8) Related-Party Transactions

Certain plan investments are managed by TIAA-CREF and VALIC. TIAA-CREF and VALIC are the custodians as defined by the Plan, and therefore, these investments and investment transactions qualify as party-in-interest transactions.




16

(9) Information Certified by the Trustee and Custodian

The plan administrator has elected the method of compliance permitted by 29 CFR 2520.103-8 of the Department of Labor’s Rules and Regulations for Reporting and Disclosures under ERISA. Accordingly, TIAA-CREF and VALIC, the custodians of the Plan, have certified as being complete and accurate the investments on the statements of net assets available for benefits, the investment activity reflected in the statements of changes in net assets available for benefits as of and for the years ended December 31, 2010 and 2009. The custodians of the Plan has also certified as being complete and accurate the investment information on the supplemental schedule as of December 31, 2010. Accordingly, as permitted under such election, the plan administrator instructed the Plan’s independent auditors not to perform any auditing procedures with respect to the information certified as complete and accurate by the Plan’s custodians for their respective periods.

Additionally, JPMorgan Chase Bank, N.A. (JPMorgan) has authorized TIAA to act as JPMorgan’s agent for purposes of certifying the year-end financial statements required by 29 CFR 2520.103-8.

(10) Plan Termination

Although it has not expressed any intent to do so, Pacific has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.

Schedule IPACIFIC UNIVERSITYSECTION 403(b) PLAN

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

December 31, 2010

Identity of issue, borrower, Description of investment including maturity date, Currentlessor, or similar party rate of interest, collateral, par, or maturity value value

Shares in registered investment company funds without publiclyquoted market prices:

* CREF Stock Account $ 11,862,879 * CREF Money Market Account 1,571,359 * CREF Social Choice Account 3,135,893 * CREF Bond Market Account 2,945,750 * CREF Global Equities Account 2,562,212 * CREF Growth Account 2,529,330 * CREF Equity Index Account 2,541,846 * CREF Inflation-linked Bond Account 1,606,296

Total shares in registered investment company funds without publicly quoted market prices 28,755,565

Shares in registered investment company funds with publicly quoted market prices:

* TIAA-CREF Lifecycle 2010 – Retirement Fund 118,101 * TIAA-CREF Lifecycle 2015 – Retirement Fund 704,984 * TIAA-CREF Lifecycle 2020 – Retirement Fund 532,705 * TIAA-CREF Lifecycle 2025 – Retirement Fund 550,848 * TIAA-CREF Lifecycle 2030 – Retirement Fund 670,709 * TIAA-CREF Lifecycle 2035 – Retirement Fund 805,357 * TIAA-CREF Lifecycle 2040 – Retirement Fund 1,213,079 * TIAA-CREF Lifecycle 2045 – Retirement Fund 177,359 * TIAA-CREF Lifecycle 2050 – Retirement Fund 59,620 * TIAA-CREF Lifecycle Retirement Income – Retirement Fund 182,383 * TIAA-CREF Growth & Income – Retirement Fund 378,854 * TIAA-CREF International Equity – Retirement Fund 440,306 * TIAA-CREF International Equity Index – Retirement Fund 911,915 * TIAA-CREF Large-Cap Growth Index – Retirement Fund 278,293 * TIAA-CREF Large-Cap Value – Retirement Fund 532,627 * TIAA-CREF Large-Cap Value Index – Retirement Fund 88,807 * TIAA-CREF Mid-Cap Growth – Retirement Fund 406,235 * TIAA-CREF Mid-Cap Value – Retirement Fund 652,778 * TIAA-CREF Real Estate Securities – Retirement Fund 69,506 * TIAA-CREF Small-Cap Balanced Index – Retirement Fund 423,185 * TIAA-CREF Small-Cap Equity – Retirement Fund 122,772 * TIAA-CREF Social Choice Equity – Retirement Fund 469,342 * TIAA-CREF S&P 500 Index – Retirement Fund 465,880 * TIAA-CREF Equity Index – Retirement Fund 289,770

Total shares in registered investment company funds with publicly quoted market prices 10,545,415

Pooled separate accounts:* TIAA Real Estate Account 1,756,843 * VALIC Aggressive Growth Lifestyle Fund 119 * VALIC Ariel Appreciation Fund 64,388 * VALIC Ariel Fund 149,836 * VALIC Blue Chip Growth Fund 143,389 * VALIC Broad Cap Value Income Fund 3,777 * VALIC Capital Conservation Fund 10,734 * VALIC Conservative Growth Lifestyle Fund 40,794 * VALIC Core Bond Fund 145,145 * VALIC Core Equity Fund 17,212

17 (Continued)



December 31, 2010


* VALIC Dividend Value Fund $ 20,773 * VALIC Foreign Value Fund 313,342 * VALIC Global Equity Fund 197,185 * VALIC Global Real Estate Fund 95,356 * VALIC Global Social Awareness Fund 115,200 * VALIC Global Strategy Fund 68,475 * VALIC Government Securities Fund 4,873 * VALIC Growth Fund 394,708 * VALIC Health Sciences Fund 26,605 * VALIC High Yield Bond Fund 92,182 * VALIC Inflation Protected Fund 132,656 * VALIC International Equities Fund 320,160 * VALIC International Government Bond Fund 8,751 * VALIC International Growth I Fund 25,366 * VALIC International Small Cap Equity Fund 316,260 * VALIC Large Cap Core Fund 26,030 * VALIC Large Cap Value Fund 42,431 * VALIC Large Capital Growth Fund 99,898 * VALIC Lou Holland Growth Fund 6,575 * VALIC Mid Cap Growth Fund 68,774 * VALIC Mid Cap Index Fund 798,481 * VALIC Mid Cap Strategic Growth Fund 66,220 * VALIC Mid Cap Value Fund 191,556 * VALIC Money Market I Fund 202,187 * VALIC Money Market II Fund 6,164 * VALIC NASDAQ-100® Index Fund 26,153 * VALIC Science & Technology Fund 283,081 * VALIC Small Cap Aggressive Growth Fund 34,090 * VALIC Small Cap Fund 22,240 * VALIC Small Cap Growth Fund 9,680 * VALIC Small Cap Index Fund 149,524 * VALIC Small Cap Special Value Fund 301,824 * VALIC Small Cap Value Fund 180,414 * VALIC Small-Mid Growth Fund 11,852 * VALIC Socially Responsible Fund 421,496 * VALIC Stock Index Fund 705,241 * VALIC Strategic Bond Fund 14,597 * VALIC Value Fund 14,763 * VALIC Vanguard Lifestrategy Growth Fund 13,439 * VALIC Vanguard Lifestrategy Moderate Fund 2,186 * VALIC Vanguard Long-Term Treasury Fund 160,366 * VALIC Vanguard Long-Term Investment Grade Fund 12,903 * VALIC Vanguard Wellington Fund Inc. 1,091,006 * VALIC Vanguard Windsor II Fund 431,758

Total pooled separate accounts 9,859,058

18 (Continued)



December 31, 2010


Insurance contracts:* VALIC Fixed Account Plus $ 2,373,310 * VALIC Short Term Fixed Account 53,588 * TIAA TIAA Traditional 4,106,231 * TIAA TIAA Traditional 15,456,183

Total insurance contracts 21,989,312

$ 71,149,350

* Represents a party-in-interest at December 31, 2010.

See accompanying independent auditors’ report.

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